What Is A Qualified Annuity?

Many employers allow their employees to contribute to an annuity program. This
becomes an investment option in a salary reduction retirement plan. Under this
plan your current taxable salary is reduced and in addition it accumulates tax-deferred
earnings. Some companies have added annuities to their retirement list. If you
work for a non-profit organization you'll probably be able to choose either a
fixed or variable annuity or both. If you have a small business, or work for yourself,
you can invest in a qualified annuity by setting up a Simplified Employee Pension
(SEP) or a Keogh. Many financial plans are available that you can adopt or you
can use a specialist to create a plan for you.

Most qualified retirement plans are self-directed. This means that you can choose
where you want your money directed depending on what the employer offers. You
generally can direct these investments in percentages. For example, you can put
half of your investment into one equity investment and perhaps a fourth into another
equity portfolio, and still another into a money market or fixed-income account.

Eligibility

Law requires that everyone in the company, including the boss, are subject to
the same eligibility rules. This means you can contribute as much as any other
person can and also receive the same benefit as far as rates go. Most companies
make it mandatory to work one year before you can contribute. It would be a
good idea to ask, however, as soon as you start working how soon you can contribute.

Remember that qualified annuities have contribution limits whereas there are
no contribution limits to a nonqualified annuity. Also in a qualified annuity
you must begin withdrawals at age 70 ½ whereas there are no federal laws
for a nonqualified.

IRA

Another option you may have is to open your own IRA with an annuity provider.
Then the IRA stands for individual retirement annuity instead of individual
retirement account. You are limited to put in $5,000 a year which applies to
all IRA's except rollovers and you are required to begin withdrawing when you
reach 701/2 years old. Nevertheless, you can take advantage of the growth and
payout options that annuities provide. You may be able to take a tax deduction
for the contribution amount if you are not eligible for an employee-sponsored
retirement plan or if your income is less than the current ceiling for deductibility.

TSA

A plan that appeals to teachers and health care workers is the TSA. This is
a tax-sheltered annuity that provides more flexibility on contributions amounts
than many other plans. This plan allows a person to contribute for the past
years that they were not able to contribute. However, the employer's don't always
make matching contributions.

This article explains some general information about various types of investment
products. It is designed to initiate your interest and should not be taken as
a recommendation to invest in any specific direction. Complete information about
all the details of each type of investment needs to be considered before suitability
can be determined.

Investors must carefully consider the investment objectives, risks, liquidity,
charges and expenses, and possible surrender fees of any investment before committing
to an investment. This and other information can be found in the prospectus for the specific issue involved and should be
carefully read before investing. The prospectus can be obtained from the individual company issuing the security, by calling
their respective office, or accessing their respective website. Your financial
professional can guide you where to find the contact information for each company.
A qualified registered securities representative can explain the specific characteristics
of each product and guide you in selecting the investments that are most suitable
for your specific needs.

This web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.